Should you accept structured payment for your personal injury claim? Yes, accept a structured settlement if the sum you’re receiving is large (something around $150,000 or more). However, when dealing with small or medium-sized settlements – less than $150,000 – you should opt for a one-time lump payment instead.
Full Answer
What is a structured settlement in a personal injury case?
If you and the defendant agree on a structured settlement, the defendant (or the defendant's insurance company) will transfer the part of the settlement that is to be structured to a different insurer, often a life insurance company that specializes in handling structured settlements.
What are the benefits of a structured settlement?
Second, the structured settlement saves you money on your taxes. While the money that you receive in a personal injury settlement is usually not taxable, you do have to pay taxes on the interest and dividends that you receive on the settlement money after you invest it.
Do I have to pay taxes on my personal injury settlement?
While the money that you receive in a personal injury settlement is usually not taxable, you do have to pay taxes on the interest and dividends that you receive on the settlement money after you invest it. That can be a large tax payment every year. With a structured settlement,...
Is a lump sum payment better than a structured settlement?
A lump sum payment is generally preferable to a structured settlement in an injury case, but there are some exceptions. Please answer a few questions to help us match you with attorneys in your area. By clicking “Submit,” you agree to the Martindale-Nolo Texting Terms.
Are structured settlement worth it?
Structured settlements can save you on taxes versus a lump sum, and for many people work as a form of income or annuity every year. Structured settlements can work in many instances. But they may be less than advantageous in others.
Are structured settlements safe?
MYTH #2: Structured settlement returns are dependent on market conditions. Structured settlements are one of the safest, most stable investments on the market. The rate of return is locked in when the annuity is purchased, providing the claimant with a reliable investment, regardless of how the market fares.
Is selling a structured settlement a good idea?
Cashing out a structured settlement can be a good way to access a significant amount of cash for an emergency, major life expense such as a home purchase, or to pay college tuition. But before making such a significant decision, review all of the costs carefully.
What are the advantages of a structured settlement?
One of the greatest advantages of a structured settlement is that it provides substantial security and financial independence, ensuring that the settlement award will be available for the plaintiff and/or his or her family, often for a lifetime.
Should I take a lump sum or structured settlement?
You should take a lump sum settlement for all small settlements and most medium-sized settlements (less than $150,000 or so). But if you are settling a larger case, there are two good reasons for doing a structured settlement. First, the structure guarantees that you won't spend the money too fast.
How do you get out of a structured settlement?
To cash out your settlement annuity, you sell your right to receive certain payments that are due under your settlement agreement. The companies that buy the rights to these payments, and give you cash, are called "factoring companies."
What percentage do structured settlement companies take?
It should also be noted how factoring companies turn a profit by purchasing structured settlements. Typically, they will take between 9% and 18% of the sale amount as their fee.
How much does it cost to sell a structured settlement?
Most companies charge between 9 and 18%, but it could be higher. You can sell part of your annuity more than once, but your take-home money will be reduced every time because each transaction comes with a set of fixed expenses you'll have to pay.
Can a structured settlement be changed?
Once the terms of the annuity are set, they cannot be changed. An immediate lump sum may also be set aside to cover attorney fees or to fund a specified trust. The life insurance company pays the plaintiff a series of payments over time, according to the terms of the annuity contract.
Are structured settlements tax free?
Income tax exemption: Structured settlement payments—including growth—are 100% income tax-free. While lump sum cash settlements are income tax-free for physical injury cases, if the money is placed in a traditional investment, then any growth is subject to income taxes.
Are structured settlements taxable?
Structured settlement annuities are not taxable — they're completely tax-exempt. It's a common question that we are asked by personal injury attorneys, and in certain situations, the tax-exempt nature of structured settlement annuities results in significant tax savings to the client.
What are the disadvantages of settlements?
A major drawback of a structured settlement is that it may jeopardize the beneficiary's eligibility for public benefits, which may be particularly problematic when the person's medical needs are covered by Medicaid rather than private health insurance.
Who owns the annuity in a structured settlement?
A settlement agreement establishing the structured settlement will typically expressly state that the assignment company has all rights of ownership of the annuity. The structured settlement payee only owns the right to receive payments. The payee does not own the structured settlement annuity.
Can a structured settlement be changed?
Once the terms of the annuity are set, they cannot be changed. An immediate lump sum may also be set aside to cover attorney fees or to fund a specified trust. The life insurance company pays the plaintiff a series of payments over time, according to the terms of the annuity contract.
What's the difference between a structured settlement and a trust?
It is tax advantaged because the structured settlement is a tax-free investment while monies invested in the trust are taxable so with less cash in the trust, taxes are overall lower. Some clients may be resistant to this, however.
Can you borrow against a structured settlement?
You cannot borrow against your structured settlement, but you can sell all or a portion of it for a lump sum of cash. You can also seek pre-settlement funding or lawsuit advances to cover legal bills prior to a lawsuit settlement.
What is a Personal Injury Settlement?
In a personal injury case, a resolution for damages will entail a certain monetary payment to be made to the claimant to rectify the claim. Usually, this disbursement is meant to repay the costs of medical or other losses incurred by the injured party. When the court is involved, a judgement may be awarded as the judge sees fit. In lieu of a judgement from the courts, the two parties may come to an agreement for a settlement through negotiations that often involves their legal representatives.
What is a Structured Settlement?
A structured settlement is sometimes suggested when a fair settlement cannot be paid in a lump sum. A structured settlement allows payments to be made to the claimant according to an agreed-upon and legally enforceable schedule. The payments may be made monthly, annually, or on some other periodic timetable.
What is a resolution for damages?
In a personal injury case, a resolution for damages will entail a certain monetary payment to be made to the claimant to rectify the claim. Usually, this disbursement is meant to repay the costs of medical or other losses incurred by the injured party.
A brief overview of structured settlements
If you agree to a structured settlement, you agree to receive periodic payments over the course of several years or for the rest of your life. The number of payments you receive depends on the severity of your injuries. Typically, insurance companies and defendants offer structured settlements only in cases of serious and/or permanent injuries.
The pros of structured settlements
A structured settlement can offer several benefits that you may not realize with a lump-sum payment. The main benefits are as follows:
The drawbacks of a structured settlement
Though structured settlements offer several benefits, they do come with a few pitfalls. For instance, many plaintiffs fear that future inflation will render their periodic payments too small. Others realize that structured settlements often cost insurance companies far less than lump-sum payments and, therefore, feel cheated.
What is a Structured Settlement?
Rather than your settlement coming to you as one large sum, a structured settlement breaks your money up into regular payments. You’ll receive a smaller lump sum at first so you can pay off lawyer fees and pressing medical bills. After that, you’ll get the rest of the money in regular installments for a designated period of time. This could be over the course of a few years or for the rest of your life, depending on your settlement amount.
Do you need legal representation after a personal injury?
After suffering from a personal injury, you’ll need legal representation to help you with the filing of a case and seeing it through to completion. At Belsky, Weinberg & Horowitz, you can tell us about your case with no fee and no commitment. Contact us today and we’ll discuss your legal options.
What are the benefits of accepting a structured settlement?
Depending on your needs, a structured settlement can offer certain benefits over a traditional lump-sum payment, including:
What types of cases benefit from using a structured settlement?
Due to brokerage fees and other considerations, structured settlements often involve cases with young individuals who have been seriously injured. Common examples include:
How can a lawyer help?
If you are trying to decide whether or not to accept a structured settlement offer from an insurance company, consulting with an experienced personal injury attorney can help in many ways.
How are personal injury claims resolved?
The majority of personal injury claims are resolved by a single payment from an insurance company, usually in the form of a check made out to the injured party . Structured settlements are different because they provide multiple payments that are stretched out over a pre-determined length of time. Such payments typically begin with an initial check (for example, if the injured party is a minor, they might receive their first check on their 18 th birthday) followed by additional payments made annually, quarterly or monthly.
What can an attorney do to help you with your insurance?
An attorney can review the facts and use their knowledge and expertise to determine the total amount of financial compensation you are entitled to receive . If the settlement offer from the insurance company is inadequate, your attorney can take legal action and file a lawsuit on your behalf. In many cases, this is the only way to hold insurance companies accountable. Hiring a lawyer helps to level the playing field and maximize your compensation.
Is structured settlement right for you?
The short answer is “it depends.” A structured settlement can be the right solution in certain situations. It can also be another tool in the insurance company’s arsenal as they work to pay victims as little as possible. If you are unsure about whether a structured settlement is right for you, continue reading.
Should I accept a structured settlement offer from the insurance company?
The insurance company may present the child’s parents with a structured settlement offer that sounds like a lot of money (six figures or more). But it would be unwise to accept such an offer without first consulting with an attorney.
How Does A Structured Settlement Work?
- If you and the defendant agree on a structured settlement, the defendant (or the defendant's insurance company)will transfer the part of the settlement that is to be structured to adifferent insurer, often a life insurance company that specializes inhandling structured settlements. You …
Calculating The Amount of A Structured Settlement
- Let's say that you want to receive $100,000 per year for 20 years,and that you want the payments to continue to your heirs if you diebefore the 20 years are up. Although you (or your heirs) will bereceiving $2,000,000 over the 20 years, the defendant will be payingmuch less than $2,000,000 to fund the settlement. That is because a structured settlement is what is known as a "futureinc…
Advantages of A Lump Sum Settlement
- The main advantage of a lump sum settlement is that you get the moneynow. If you need to pay off bills from the settlement, that is animportant reason to get all of the money up front. If you are planningto start a business or buy a house or car with the settlement proceeds,then you need the money now. And if the settlement simply isn't thatlarge, you get no significant advantage from a …